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Your write up should be analytical rather than descriptive of the contents of the
case. Your analysis should be geared towards identification of key questions and
problems, evaluation of the situations, and offering alternatives and solutions as
well as discussing pros & cons of alternatives suggested. Since most cases used in
the class require a composite of careful thinking, conceptualization, quantitative
analysis and some form of decision making your analyses will be evaluated based
on breadth and depth of your thought process documented in your submitted
paper.You should make a significant effort to make use of the information and data
provided in exhibits and footnotes. While I provided you specific questions, you
should synthesize your analysis in a separate section in the spirit of an executive

1. How are Mortensens estimates of Midlands cost of capital used? How, if at all,
should these anticipated uses affect the calculations?
2. Calculate Midlands corporate WACC. Be prepared to defend your specific
assumptions about the various inputs to the calculations. Is Midlands choice of
EMRP appropriate? If not, what recommendations would you make and why?
3. Should Midland use a single corporate hurdle rate for evaluating investment
opportunities in all of its divisions? Why or why not?
4. Compute a separate cost of capital for the E&P and Marketing & Refining
divisions. What causes them to differ from one another?
5. How would you compute a cost of capital for the Petrochemical division?


Ocean Carriers uses a 9% discount rate to evaluate its investment projects.
1. Do you expect daily spot hire rates to increase or decrease next year?
2. What factors drive average daily hire rates?
3. How would you characterize the long-term prospects of the capesize dry bulk
4. Should Ms Linn purchase the $39M capesize? Make 2 different assumptions.
First, assume that Ocean Carriers is a U.S. firm subject to 35% taxation. Second,

assume that Ocean Carriers is located in Hong Kong, where owners of Hong Kong
ships are not required to pay any tax on profits made overseas and are also
exempted from paying any tax on profit made on cargo uplifted from Hong Kong.
5. What do you think of the companys policy of not operating ships over 15 years


1. Do you believe Blainescurrent capital structure and payout policies are
appropriate? Why or why not?
2. Should Dubinski recommend a large share repurchase to Blaines board? What
are the primary advantages and disadvantages of such a move?
3. Consider the following share repurchase proposal: Blaine will use $209 million
of cash from its balance sheet and $50 million in new debt-bearing interest at the
rate of 6.75% to repurchase 14.0 million shares at a price of $18.50 per share.
How would such a buyback affect Blaine? Consider the impact on, among other
things, BKIs earnings per share and ROE, its interest coverage and debt ratios,
the familys ownership interest, and the companys cost of capital.
4. As a member of Blaines controlling family, would you be in favor of this
proposal? Would you be in favor of it as a non-family shareholder?